The unpopular leader has faced criticism over his handling of public demand for democratic reforms, the economy and the Severe Acute Respiratory Syndrome health crisis in 2003.

Mr. Tung also promised to pay more attention to the city's poor. A $25 million fund has been created to provide education, employment and training to the poor.

While Hong Kong remains one of the world's wealthiest cities, there are concerns that a growing income gap may lead to social unrest. While the city is famous for its fleets of luxury cars and sky-high housing costs, welfare groups estimate that more than 200,000 thousand families live on less than $510 a month.

"We will …take practical measures to mitigate antagonism between different strata. We will seriously address the problem of poverty to break the cycle of inter-generational poverty," promised Mr. Tung.

Hong Kong has been administered under a "one country, two systems" policy since its return to Chinese sovereignty seven years ago. The policy grants Hong Kong autonomy and maintains its capitalist economy and Western legal system despite China's communist system.

Mr. Tung has been the city's chief executive since the return to Chinese sovereignty. He was selected by several hundred city residents, who were handpicked by Beijing.

About half of the city's legislature is directly elected by universal suffrage. Democracy activists have been demanding direct elections to pick the next chief executive in 2007 and all of the legislators.